PENSION UPDATE: Big news for pensioners. The time has come to file income tax returns. Therefore, before filing income tax returns, pensioners and family pensioners should be aware that the income tax rules for pension and family pension income differ. Many people often mistake the income tax rules for pension and family pension income for the same reasons, which can lead to difficulties in calculating taxes, receiving notices, and receiving refunds.
Pension is considered as salary
Under the Income Tax Act, pension received after retirement is considered salary. This is because it is paid to the employee by a former employer and is related to an employee-employer relationship. Therefore, pension income is taxed under the head “Income from Salary.” Pensioners also benefit from the standard deduction. Standard deductions can be claimed up to Rs 50,000 under the old tax regime and Rs 75,000 under the new tax regime, provided the salary or pension amount is not less than this amount.
Separate rules on family pension
Family pension received by the spouse or legal heir of an employee or pensioner after his or her death is not considered salary. It is classified under “income from other sources.” Because of this, family pension recipients are not eligible for the standard deduction. However, a special deduction is available under Section 57(iia) of the Income Tax Act. Under the old tax regime, one-third of the family pension amount, or Rs 15,000, and under the new tax regime, one-third of the amount, or Rs 25,000, whichever is less, can be claimed as a deduction.
Advance tax relief for senior citizens
Under Section 207(2) of the Income Tax Act, resident senior citizens aged 60 years or above are exempt from paying advance tax if their income does not include income from business or profession. However, they must pay the tax due when filing their ITR. There is a Special facilities for those above 75 years of age.
Certain senior citizens aged 75 or older may also be exempt from filing ITR under Section 194P. Their income must be limited to pension and interest earned on deposits held in the same bank, and they must submit Form 12BBA to the bank. Experts say that before filing ITR for AY 2026-27, pensioners should reconcile the information in Form 16, AIS, and Form 26AS. Showing income under the correct head can help avoid unnecessary tax disputes and notices.
